Tariff turmoil is drawing global investors back to Japan’s stock market, as prospects of better shareholder returns entice funds fleeing economic uncertainty in the US.
Global investors have been net buyers of cash Japanese equities for the last eight consecutive weeks — the longest streak since June 2023. That marks a turnaround after they were mainly net sellers in the first three months of this year.
The influx of foreign money to Japan comes as many global funds seek to reduce their exposure to the US amid fears about the economic impact of Trump’s policies.
Foreigners bought ¥285 billion ($2 billion) in shares during the week to May 23, bringing their total net purchases since the start of April, when Donald Trump unleashed his levies, to ¥2.86 trillion.
Japan’s progress on corporate governance reform makes it an attractive destination, according to Maki Sawada, a strategist at Nomura Securities Co.
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Firms have announced a record number of share buybacks so far this year, under pressure from the Tokyo Stock Exchange and activist investors to boost shareholder returns. “Japan’s companies are actively making efforts to improve their capital allocation policies, and investors are taking note,” she said.
Growing expectations for a trade deal between Japan and the US, after the UK and China signed agreements this month, are also helping sentiment. Tokyo’s chief trade negotiator Ryosei Akazawa is headed to Washington this week for a fourth round of talks.
Amid worries of a potential recession in the US, Japan’s macroeconomic tailwinds are also boosting its global appeal, according to Sawada.
“Prices are rising in Japan, but wages are also increasing pretty quickly,” she said. “Investors can see there’s a possibility of increased domestic consumption,” and anticipation around another potential rate hike by the Bank of Japan is further fueling foreign interest, Sawada added.
